Firemen’s Retirement System of St. Louis vs NASCAR Holdings Inc.
Firemen’s Retirement System of St. Louis has filed a class-action lawsuit against NASCAR Holdings Inc. which also mentions Lesa France Kennedy, James “Jim” France in addition to Brian France.
On November 10th, 2018, NASCAR offered a bid to purchase the International Speedway Corporation at $42 per share (Roughly $2 billion). On December 14, 2018, the class-action lawsuit was filed in Volusia County, Florida.
Members of the France Family Group within ISC: James C. France (ISC Chairman), Lesa France Kennedy (ISC Vice Chairwoman and Chief Executive Officer).
“Plaintiff, The Firemen’s Retirement System of St. Louis, on behalf of itself and a class of all other similarly situated public stockholders of International Speedway Corporation, brings the following class action complaint against members of ISC’s controlling stockholder, ISC’s board of directors, and ISC’s Chief Financial Officer, for breaches of fiduciary duty in connection with the proposed acquisition of ISC by NASCAR Holdings, Inc., which the France Family also controls,” states the filing by Philip J. Snyderburn, Esq. with the law firm of Snyderburn, Rishoi & Swann, on behalf of the plaintiffs as reported by KickinTheTires.
“Plaintiff also brings this Complaint against NASCAR for aiding and abetting these breaches of fiduciary duty. The allegations in this Complaint are based upon the knowledge of Plaintiff as to itself, and on information and belief, including an investigation by Plaintiff’s counsel and review of publicly available information.”
ISC operates these NASCAR tracks: Auto Club Speedway; Chicagoland Speedway; Darlington Raceway; Daytona International Speedway; Homestead-Miami Speedway; Kansas Speedway; Martinsville Speedway; Michigan International Speedway; ISM Raceway; Richmond Raceway; Talladega Superspeedway; Watkins Glen International;
ISC stock price drop leading up to NASCAR’s bid
The class-action lawsuit makes claims that $42 per share was not a fair price offered for the company. It further states that NASCAR purposefully caused the stock price to dip prior to the offer.
On May 18th, 2018, the stock price closed at $42.75. On July th, 2018 is hit a year long high of $46.85. September 28th, 2018, it sat at $43.80.
That’s when the stock began to dip. It bottomed out at $35.18 on October 11th, 2018. By November 12th, 2018, the stock was back up to $42.49.
The lawsuit claims the France family, “did not want ISC’ s stock price to rise in October 2018, because it would make their effort, through NASCAR, to take ISC private much more expensive.”
“Instead, to drive down ISC’s stock price in advance of NASCAR’s offer to buy ISC’s minority shares, defendants James France and Lesa France Kennedy used their positions as ISC’s controlling stockholders and Company directors and officers to cause ISC to announce substantially reduced guidance for ISC’s fiscal year on October 4, 2018,” the lawsuit reads.
“Predictably, ISC’s stock price fell substantially and closed at $35.30 on Oct. 4, 2018. The stock price remained in the $30s per share for the next twenty-five trading days, through Nov. 8, 2018.”
NASCAR offers bid to purchase ISC as stock price falls
On November 8th, 2018, NASCAR sent an offer to ISC to purchase shares of the company at $42 and take the company private. The stock closed at $39.50 that day.
The France family stated the offer was 14% higher than the 30-day average of the stock price. Yet, since May of that year the stock did not dip below $42 until October 4th.
The lawsuit further mentions that NASCAR is attempting to purchase ISC so it looks more valuable in a potential sale of NASCAR as a whole. NASCAR contracted an evaluation of their company by Goldman Sachs last year. Many has speculated that was a step toward the France family selling off the company.
Months later, they purchased the ARCA Racing Series. Which was a move that doesn’t really align with the theory that the France family is looking to sell.
ISC: Special Committee
ISC put a special committee in place to consider the offer. They would then submit their determination to the Board of Directors for ISC. However, the ISC Board is controlled by the France family.
The committee was put in place to simply consider the offer from NASCAR. The plaintiffs would want them to negotiate a higher price.
ISC’s special committee: J. Hyatt Brown, Larry Aiello, Jr., Larree Renda and William Graves.
“The Company cautions shareholders and others considering trading in its securities that the Board just received the non-binding proposal letter from NASCAR and no decisions have been made with respect to the Company’s response to the proposal. There can be no assurance that any definitive offer will be made, that any agreement will be executed or that this or any other transaction will be approved or consummated.”
The lawsuit stated that two of the members of the special committee have close ties to the France family. Which, “cripples their ability to consider the Proposal impartially and protect the interests of ISC’ s minority stockholders. And all four members of the Special Committee served on ISC’s audit committee that, according to its charter, was responsible for approving the October Guidance.”
“Thus, not only did James France and Lesa France Kennedy manipulate ISC’s stock price, and initiate, structure and opportunistically time the Proposal to create the illusion that the $42 per share price was a premium offer, but the Proposal is now in the hands of a Special Committee whose members the France Family and NASCAR know lack independence and have no genuine ability to negotiate fair buyout terms for ISC’s minority stockholders.”
ISC comments on the lawsuit
ISC addressed the lawsuit in the recent annual report.
“From time to time, we are a party to ordinary routine litigation incidental to our business. We do not believe that the resolution of any or all of such litigation will have a material adverse effect on our financial condition or results of operations,” reads the statement in the annual report.
“Mergers, such as the one proposed in the NASCAR Offer, often attract litigation from minority shareholders. On December 14, 2018, a putative class-action shareholder lawsuit was filed in the Seventh Judicial Circuit of Volusia County, Florida by attorneys on behalf of the Firemen’s Retirement System of St. Louis related to the NASCAR Offer. The complaint names as defendants the Company, its directors, its CFO, NASCAR Holdings, and certain of the Family Stockholders, and alleges bread of fiduciary duty and for aiding and abetting those breaches.”
“The Company currently maintains Directors & Officers Insurance Applicable insurance policies contain certain customary limitations, conditions and exclusions and are subject to a self-insured retention amount.”
The ISC stock price was $43.08 as of close on Tuesday.